March 2016 – Budget Highlights

Capital Gains Tax

Capital gains tax (CGT) is reduced from 28% to 20% for higher rate tax payers and 18% to 10% for basic rate tax payers (sadly this does not apply to gains on residential property).

Low CGT rates may not last, so consider realising investments sitting on substantial gains while rates are low.

Further Boost For ISAs

The ISA allowance rises from £15,240 in the 2016/17 tax year to £20,000 in 2017/18.

There’s a new ‘Lifetime ISA’ for those aged between 18 and 40, where up to £4000 a year can be sheltered as part of your standard ISA but with a 25% boost on your annual contribution from the Treasury up to the age of 50.

The Lifetime ISA can be put towards a first home (value up to £450,000) or set aside for retirement from age 60. Take it out before you’re 60 and you lose the government contribution, the associated returns and pay a 5% surcharge.

Personal Taxation

Higher rate tax threshold rises from £42,385 to £45,000.

The 2016/17 tax year brings in new rules on dividends, including a £5,000 tax free allowance for everyone.

Owner Managed Businesses/Self Employed

Corporation tax is falling from 20% in this tax year to 17% from 2020.

Class 2 National insurance contributions will be abolished for the self-employed from April 2018.

Stamp duty land tax is being changed:

  • Property under £150,000 no tax will be payable;
  • 2% will be charged between £150,001 and £250,000; and
  • 5% above £250,000.

This includes commercial property held in Self Invested Personal Pensions (SIPPs) and Small Self- Administered Pensions (SSAS).

If you need advice on any of these changes ES Walton can help you.

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